NEW YORK: The dollar edged lower against a basket of major currencies on Monday ahead of US durable goods orders and an inflation reading this week that could provide more information on how soon the Federal Reserve may begin cutting interest rates.
In cryptocurrencies, ether rose to another two-year high. It was last up 4.5% at $3,074, while bitcoin rose 0.7% to $51,371.
US durable goods data is due Tuesday, while January’s US personal consumption expenditures price index, which is the Fed’s preferred measure of inflation, will be released Thursday.
The market has recently reduced expectations for the size and how soon it expects the Fed to cut rates, as the US economy remains strong.
Fed funds futures show a 54.9% chance that the Fed starts cutting rates in June, with a 35.3% probability of no cut at all, a shift from bets on Feb. 1 of a 62% chance of a cut in March, according to CME Group’s FedWatch Tool.
Futures traders also are betting on about 81 basis points of cuts by December, about half the amount they anticipated at the end of last year.
Inflation figures in the euro zone, Japan and Australia also land this week, alongside a rate decision from the Reserve Bank of New Zealand (RBNZ) and China PMI surveys.
The dollar index was last down 0.2% at 103.81 - though the US currency strengthened 0.1% to 150.70 against the Japanese yen.
“The market is a bit cautious and the key driver for dollar/yen is US yields,” Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, said.
“In Q4 of last year, the market got very aggressive about the Fed easing and in the fist half of Q1, the market adjusted, interest rates rose and the dollar rose. That adjustment is over, and I think we’ll begin seeing weak economic data beginning with tomorrow’s durable goods orders.” Japan’s nationwide consumer prices also are due on Tuesday and are forecast to show core inflation slowed to an annual rate of 1.8% in January, the lowest since March 2022.
That would complicate the Bank of Japan’s (BOJ) plans to end negative interest rates in coming months, keeping the yen under pressure in the near term.
The euro was up 0.2% at $1.0849, after gains against the dollar in eight of the last nine trading sessions.
ECB officials have reiterated their focus on inflation in the euro zone, particularly the service sector and wage growth.
A major driver behind the euro’s strength has been the narrowing gap between where traders believe US and euro zone interest rates will finish the year.
Only two weeks ago, investors were assuming the Fed would cut rates by around 80 basis points this year, compared with around 100 bps from the ECB. By Monday, that gap had all but disappeared.
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